Write the differences between IAS 39 and IFRS 9

IFRS 9 and IAS 39 are two important accounting standards which tell how to account for financial instruments. IFRS is the recent standard which was released on 24/07/2014.


The major differences between the International Accounting Standards 39 (IAS 39) and International Financial Reporting Standards 9 (IFRS 9) are as follows−

Its includes hedge accounting for fair value hedging interest rate risk for dynamic portfolio of financial instruments
May apply specific hedge accounting requirements in IAS 39 (portfolio of fair value hedging of interest rate risk)
Credit exposures
Credit risk hedge accounting is not addressed specifically.
An option is introduced to designate credit exposure.
Hedging instruments (qualifying)
For foreign currency risk, non-financial derivative financial instruments may used
Non- derivative financial instruments (measured at FVTPL) are eligible
Accounting for non-designated element of a derivative
Changes in fair value of non-designated time value (option) or forward element (forward contract) are recognized immediately in profit/loss.
Changes in fair value of time value (option) when only intrinsic value is designated are recognized as other comprehensive income (OCI) and after reclassification it is recognized in profit/loss.
Hedged items (qualifying)
  • Equity instruments designated at FVTOCI (in IFRS 9) are not eligible.
  • Derivatives are not eligible.
  • Net positions are not eligible.
  • Non-financial items of risk components (other than foreign currency risk) are not eligible.
  • Equity instruments designated at FVTOCI are eligible.
  • Combination of exposure (should be qualified as hedged item) and derivatives are eligible.
  • Net positions (net nil position is included) are eligible.
  • Non-financial items of risk components (should be separately identified and reality measurable) are eligible.
Hedge effectiveness
  • To apply hedge accounting, a hedge relationship needs to be highly effective.
  • No rebalancing concept.
  • Both prospective hedge effectiveness assessment and retrospective hedge effectiveness assessment are required.
  • On a quantitative basis, assessment of retrospective hedge effectiveness required always, on qualitative hedge effectiveness assessment of prospective testing is limited.
  • Changes in effectiveness assessment are not allowed (in the life of hedge relationships).
  • Not required foreign currency basis.
  • Should be an economic relationship between hedging instruments and hedged items.
  • There is a rebalancing concept.
  • Prospective hedge effectiveness is required.
  • If critical terms don’t match, then qualitative hedge effectiveness assessments are applied.
  • Assessment if hedge effectiveness is can be changed (if necessary)
  • Including foreign currency basis is not allowed.
Hedge relationship (Discontinuation)
Voluntary discontinuation is allowed.
Voluntary discontinuation is not allowed.
Hedge relationship ( Documentation)
Description of ineffectiveness (source) and determination of hedge ratio is not required.
Description of ineffectiveness (source) and determination of hedge ratio is required.
Cash flow hedge accounting
Basic adjustments (non-financial items) are optional.
Basic adjustments (non-financial items) are mandatory.

Updated on: 05-Jul-2021


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